Jack from Texas wrote to ask whether Quasar Aerospace (QASP.PK) could be the next big penny stock?

In a word, no.

Here's the bull case, and judging by emails there are more than a few of  you out there.   According to Pink Sheets, Quasar Aerospace sports a paltry $3.16 million market cap.  That sounds like a very small price to pick up what QASP claims will be $150 million in revenue and $33 million in EBITDA next year.  Both Quasar Aerospace, and its CEO, Dean Bradley, have been buyers of the stock, but the amounts involved are pretty small.

Dig a little deeper and the story falls apart.  Currently, Quasar only has a relatively small flight school operation in Jacksonville, Florida.  While Quasar claims that the flight school will expand rapidly, QASP doesn't say how it can fund the planned $23 million expansion.   We don't know how well Quasar is doing or what its financial state is because the pink sheets company doesn't file anything with the SEC.

The flight school is just a part of the mystery.  QASP's really big plans involve the rollup of four separate aerospace companies.  In what has to be one of the most bizarre conference calls ever, Bradley states that Quasar Aerospace has a binding option to purchase the first of these four companies but the company cannot be named.  He also said the target company is well-known and one of the most highly regarded independent aerospace businesses in existence.  And don't worry about financing — Bradley claims that Quasar Aerospace has lined up German and/or Swiss investors (who also cannot be disclosed) to supply $54 million in non-convertible preferred stock financing. 

Adding to the intrigue, Quasar takes the unusual position that all four of its acquisitions need to close on the exact same day to save on legal fees:

We would like to also update shareholders on the closing of our acquisitions. It is critical to do the four acquisitions as a single transaction on a single day. Doing otherwise would lead to excessive transactional fees and duplication of expenses. With the obvious complications of closing four acquisitions at precisely the same time on the same day, we have to find a day and time that is good for all parties and their support and legal teams. We will be soon choosing a day and time that is acceptable to all concerned. While we tried to make all of this happen for Friday, August 28, 2009, it simply is not possible. We will provide an update when it is prudent.

Investors buying Quasar Aerospace (QASP.PK) are placing bets that: (1) the mystery deals actually exist; (2) the four-way mega-transaction will actually close; (3) the financing is there; and (4) QASP management has the skill to pull this off.   That's a huge leap of faith.

DISCLOSURE:  No positions.

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